Consolidated Financial Statements and Uniform Guidance Supplementary Information Together with Report of Independent Certified Public Accountants

THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES

For the years ended December 31, 2015 and 2014

THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Report of Independent Certified Public Accountants 1 - 2

Financial Statements: Consolidated Statements of Financial Position 3 Consolidated Statements of Operations 4 Consolidated Statements of Changes in Net Assets 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 - 29

Supplementary Information: Net Patient Service Revenue 31 Other Revenue and Net Assets Released from Restrictions - Operations 32 Changes in Temporarily Restricted Net Assets - Specific Purpose Fund 33 Expenses 34 - 36 Refundable Advances and Grant Revenue 37 - 41

Consolidating Statement of Financial Position 42 - 45 Consolidating Statement of Operations 46 - 47

Schedule of Expenditures of Federal Awards 48 - 49

Notes to Schedule of Expenditures of Federal Awards 50 - 51

Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Required by Government Auditing Standards 52 - 53

Report of Independent Certified Public Accountants on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance 54 - 55

Schedule of Findings and Questioned Costs: Section I - Summary of Auditors’ Results 56 Section II - Financial Statement Findings 57 Section III - Federal Award Findings and Questioned Costs 58

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries

Report on the financial statements We have audited the accompanying consolidated financial statements of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries (the “Organization”), which comprise the consolidated statements of financial position as of December 31, 2015 and 2014, and the related consolidated statements of operations and cash flows for the years then ended, and the related notes to the financial statements.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries as of December 31, 2015 and 2014, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Other matters Supplementary information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information included on pages 31 through 47 and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, on pages 48 and 49 are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. The consolidating information on pages 42 through 47 is presented for purposes of additional analysis, rather than to present the financial position, results of operations, and cash flows of the individual entities (or, organizations or companies), and is not a required part of the consolidated financial statements. Such supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures. These additional procedures included comparing and reconciling the information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.

Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated May 31, 2016, on our consideration of the Organization’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control over financial reporting and compliance.

New York, New York May 31, 2016

- 2 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidated Statements of Financial Position As of December 31, 2015 and 2014

ASSETS 2015 2014 CURRENT ASSETS Cash and cash equivalents $ 10,543,925 $ 18,471,300 Short-term investments 305,403 158,264 Assets whose use is limited required for current liabilities 639,435 808,678 Accounts receivable for services to patients - less allowance for uncollectible accounts of $ 1,168,000 in 2015 and $1,165,000 in 2014 9,556,631 8,662,540 Prepaid expenses 2,034,697 1,602,321 Inventory of supplies 543,003 543,542 Other receivables 2,147,062 3,778,917 Total current assets 25,770,156 34,025,562 Assets whose use is limited Foundation funds 82,985,296 93,854,367 Trusteed funds 24,712,105 26,245,577 Self-insurance trust 2,206,145 2,612,707 Restricted use cash 223,435 212,678 Depreciation fund 31,776 31,776 Donor-restricted long-term investments 3,403,100 2,866,329 113,561,857 125,823,434 Less: assets whose use is limited required for current liabilities (639,435) (808,678) 112,922,422 125,014,756 Deferred financings costs, net 84,332 89,924 Interest rate cap 236 8,249 Property, plant and equipment, net 30,704,874 31,391,843 Total assets $ 169,482,020 $ 190,530,334 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 2,109,350 $ 2,113,507 Accrued expenses 3,280,016 3,398,239 Current portion of long-term debt 612,924 597,718 Estimated self-insurance liabilities 416,000 596,000 Estimated amounts due to third-party payors - net 647,189 2,174,360 Refundable advances 1,837,187 2,169,915 Accrued retirement benefits 2,119,019 2,018,223 Total current liabilities 11,021,685 13,067,962 Long-term debt, net of current portion 5,219,077 5,832,000 Estimated self-insurance liabilities, net of current portion 1,814,889 2,522,640 Accrued retirement benefits 56,221,040 57,378,641 Total liabilities 74,276,691 78,801,243 NET ASSETS Unrestricted 91,523,082 108,318,545 Temporarily restricted 2,894,662 2,622,961 Permanently restricted 787,585 787,585 Total net assets 95,205,329 111,729,091 Total liabilities and net assets $ 169,482,020 $ 190,530,334

The accompanying notes are an integral part of these consolidated financial statements. - 3 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidated Statements of Operations For the years ended December 31, 2015 and 2014

2015 2014 REVENUES Net patient service revenue $ 60,706,321 $ 61,126,173 Grant revenue 10,695,361 9,378,985 Other revenue 5,933,260 5,701,698 Medicare technology stimulus revenue - 1,314,327 Net assets released from restrictions - operations 226,975 398,042 Total revenues 77,561,917 77,919,225 EXPENSES Salaries and wages 48,607,312 47,608,424 Supplies and expenses 18,665,525 18,819,060 Employee benefits 18,399,886 14,050,613 Depreciation and amortization 5,351,397 5,351,832 Provision for bad debts 290,078 203,418 Interest 151,694 170,421 Total expenses 91,465,892 86,203,768

Loss from operations (13,903,975) (8,284,543) NONOPERATING GAINS AND (LOSSES), NET Contributions 717,300 623,132 Corporate restructuring costs (1,946,729) - Investment return - net (5,756,689) 2,543,898 Change in fair value of interest rate cap (8,014) (30,906) Gain/losses on disposal of assets (693) - Nonoperating (loss) gain, net (6,994,825) 3,136,124

Deficiency in revenue and gains over expenses and losses (20,898,800) (5,148,419) OTHER CHANGES IN UNRESTRICTED NET ASSETS Net assets released from restrictions - capital acquisition 1,279,577 653,050 Other accrued retirement benefits adjustment 2,823,760 (29,678,088) Decrease in unrestricted net assets $ (16,795,463) $ (34,173,457)

The accompanying notes are an integral part of these consolidated financial statements. - 4 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidated Statements of Changes in Net Assets For the years ended December 31, 2015 and 2014

2015 2014

UNRESTRICTED NET ASSETS Deficiency in revenue and gains over expenses and losses $ (20,898,800) $ (5,148,419)

OTHER CHANGES IN UNRESTRICTED NET ASSETS Net assets released from restrictions - capital acquisitions 1,279,577 653,050 Other accrued retirement benefits adjustment 2,823,760 (29,678,088)

Decrease in unrestricted net assets (16,795,463) (34,173,457)

TEMPORARILY RESTRICTED NET ASSETS Restricted grants 1,212,315 545,274 Contributions 662,975 356,770 Investment return (97,037) 121,336 Net assets released from restrictions - operations (226,975) (398,042) Net assets released from restrictions - capital acquisitions (1,279,577) (653,050)

Increase (decrease) in temporarily restricted net assets 271,701 (27,712)

Decrease in net assets (16,523,762) (34,201,169)

Net assets, beginning of year 111,729,091 145,930,260

Net assets, end of year $ 95,205,329 $ 111,729,091

The accompanying notes are an integral part of these consolidated financial statements. - 5 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2015 and 2014

2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Decrease in net assets $ (16,523,762) $ (34,201,169) Adjustments to reconcile decrease in net assets to net cash (used in) provided by operating activities Depreciation and amortization 5,356,989 5,351,832 Provision for bad debts 290,078 203,418 Change in fair value of interest rate cap 8,013 30,906 Realized and unrealized gains and losses - net 7,951,239 (719,339) Restricted contributions and investment return (565,938) (478,106) Other accrued retirement benefits adjustment (2,823,760) 29,678,088 Changes in assets and liabilities Accounts receivable for services to patients (1,184,169) (1,140,117) Prepaid expenses and other assets 1,200,018 (964,726) Accounts payable (4,157) (1,381,442) Accrued expenses and other current liabilities (450,951) 373,271 Self-insurance liabilities (887,751) 2,184 Estimated third-party payor settlements, net (1,527,171) 4,921,195 Accrued retirement benefits 1,766,955 (913,025)

Net cash (used in) provided by operating activities before trading securities (7,394,367) 762,970 Change in investments - trading securities 4,163,199 3,696,819

Net cash (used in) provided by operating activities (3,231,168) 4,459,789

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant, and equipment, net (4,664,428) (3,412,029)

Net cash used in investing activities (4,664,428) (3,412,029)

CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (597,717) (583,381) Restricted contributions and investment return 565,938 478,106

Net cash used in by financing activities (31,779) (105,275)

Net (decrease) increase in cash and cash equivalents (7,927,375) 942,485 Cash and cash equivalents - beginning of year 18,471,300 17,528,815 Cash and cash equivalents - end of year $ 10,543,925 $ 18,471,300

Supplemental disclosures of cash flow information: Interest paid $ 151,694 $ 170,421

The accompanying notes are an integral part of these consolidated financial statements. - 6 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2015 and 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization The Winifred Masterson Burke Rehabilitation Hospital (the “Hospital” or the “Parent”) is located in White Plains, New York, and is a not-for-profit rehabilitation hospital. The Hospital provides inpatient and outpatient services.

The Hospital is the sole corporate member of The Winifred Masterson Burke Foundation, Inc. (the “Foundation”) and The Winifred Masterson Burke Medical Research Institute, Inc. (the “Institute”) (collectively, the “Organization”).

The Foundation is a not-for-profit organization formed to hold and manage cash and investments transferred to it by the Hospital. The Institute is a not-for-profit organization that performs medical research activities.

The Hospital, Foundation and Institute are recognized by the Internal Revenue Service as exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (“IRC”).

On January 4, 2016, the Winifred Masterson Burke Rehabilitation Hospital (Parent only) officially joined the Montefiore Medical System (“Montefiore”), a non-for profit health system based in the Bronx, New York as an affiliate.

On September 9, 2015, a newly formed corporation was established “The Winifred Masterson Burke Corporation. (“the Corporation”). The Corporation is a 501(c)(3) public charity organization. Concurrent with the Montefiore transaction, the Corporation became the sole corporate member of the Foundation and Institute.

Basis of Accounting/Principles of Consolidation The consolidated financial statements have been prepared on the accrual basis of accounting. All intercompany transactions and balances have been eliminated in consolidation.

Statements of Operations The Organization’s operating income includes all unrestricted revenues and expenses. Non-operating gains and losses include contributions, restructuring costs, the change in fair value of the Organizations interest rate cap, unrestricted income on investments, realized gains and losses, the change in unrealized gains and losses on trading securities, which includes income related to investments in limited partnerships measured using a net asset value (“NAV”). The consolidated statements of operations also include the caption “deficiency in revenue and gains over expenses and losses,” which is the performance indicator. Other changes in unrestricted net assets which are excluded from the performance indicator, consistent with industry practice, include contributions of long-lived assets (including assets acquired using contributions which by donor restriction were to be used for the purposes of acquiring such assets), and other accrued retirement benefits adjustment.

Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that - 7 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Net patient service revenue, allowance for uncollectible patient accounts receivable, amounts due to/from third-party payors, investments without readily determinable fair values, interest rate cap, estimated self-insurance liabilities, and accrued retirement benefit liabilities represent significant accounting estimates reflected in the consolidated financial statements. Actual results could differ from those estimates. The Organization’s net patient service revenue for the years ended December 31, 2015 and 2014, increased by $249,000 and decreased by $658,000, respectively, as a result of changes in estimates related and third-party payor settlements and collection results related to receivables from prior years.

Cash and Cash Equivalents Cash in banks and all highly liquid investments with original maturities of three months or less at the date of purchase are considered cash and cash equivalents, except for amounts included in assets whose use is limited. The carrying amount approximates fair value. The Organization’s cash and cash equivalents are held in accounts whose balances substantially exceed the amount of related federal insurance.

Short-term Investments Investments with original maturities of three months or greater at the date of purchase are considered short-term investments, except for amounts included in assets whose use is limited. The carrying amount approximates fair value.

Assets Whose Use is Limited Assets whose use is limited include trusteed funds for which the Board of Directors of the Organization is empowered to use for patient care and other related purposes, within certain guidelines. Also included are Foundation investments, donor-restricted long-term investments, self-insurance trust investments, assets whose use is limited under an indenture agreement (foundation fund), a restricted cash fund and amounts set aside for plant replacement purposes (depreciation fund). Assets whose use is limited classified as current are for the current portion of estimated self-insurance liabilities and restricted cash.

Investments - Classified as Assets Whose Use is Limited Investments with readily determinable fair values are stated at fair value based upon quoted market prices. The Organization invests in a variety of alternative investments carried at their net asset value per share as a practical expedient, as provided by the investment managers. Alternative investments are primarily in private equity funds and privately traded mutual funds, in which the underlying investments are in marketable securities and commodities. Because alternative investments are not readily marketable, their estimated value is subject to uncertainty and therefore may differ from the value that would have been used had a ready market for such investments existed. These instruments may contain elements of both credit risk and market risk. Such risks included, but are not limited to: limited liquidity, absence oversight, dependence on key individuals, emphasis on speculative investments, and nondisclosure of portfolio composition.

Investment returns includes dividend and interest income, realized gains and losses and unrealized gains and losses on its trading securities and is included in non-operating gains and losses, net.

- 8 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

The Organization also invests in various limited partnerships. These investments utilize a “fund-of-funds” approach resulting in diversified multi-strategy, multimanager investments. The partnerships invest capital in a diversified group of investment entities, primarily in limited partnership interests issued by nontraditional firms or “hedge funds,” which engage in a variety of investment strategies managed by money managers. These investments are measured using a NAV per share, or its equivalent. Management’s estimates are based on information provided by the fund managers or the general partners.

Inventory of Supplies Inventory of supplies are valued at the lower of cost (average-costing method approximates FIFO) or market.

Deferred Financing Costs Deferred financing costs represent costs associated with the existing debt, and are being amortized over the term of the related debt.

Interest Rate Cap The Organization recognizes all derivative financial instruments (interest rate cap) in the consolidated financial statements at fair value. Management has determined that the Organization’s interest rate cap agreement does not qualify as a hedge for financial reporting purposes. Consequently, the change in the fair value of the Organization’s interest rate cap agreement is included as a component of deficiency in revenue and gains over expenses and losses in the consolidated statement of operations.

The interest rate cap agreement is used by the Organization to manage exposure to an increase in interest rates. Derivative financial instruments involve, to a varying degree, elements of market and credit risk. The market risk associated with this instrument resulting from interest increases is expected to offset the market risk of the liability being hedged.

Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Cost for donated assets is the fair value at the date of the gift. Equipment under lease is depreciated in accordance with the Organization’s standard depreciation policy or term of the lease, whichever is shorter. Depreciation and amortization are provided for using the straight-line method, using the following estimated useful lives established by management:

Land improvements 5 - 25 years Buildings 15 - 40 years Fixed equipment 5 - 20 years Major movable equipment 2 - 20 years

- 9 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Gifts of land, buildings, and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service.

The Organization, using its best estimates based on reasonable and supportable assumptions and projections, reviews for impairment of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of its assets might not be recoverable.

Estimated Self-Insurance Liabilities The provision for estimated self-insurance liabilities includes estimates of the ultimate costs for both reported claims and claims incurred but not reported.

Unrestricted, Temporarily Restricted and Permanently Restricted Net Assets Unrestricted net assets are not subject to donor-imposed stipulations and, therefore, may be expended for any purpose in performing the primary objectives of the Organization. Temporarily restricted net assets are those whose use has been limited by donors to a specific time period or purpose. Temporarily restricted net assets are available for education, purchase of equipment, research, financial assistance and other items. Permanently restricted net assets have been restricted by donors to be maintained by the Organization in perpetuity or used at a Board appropriated spending rate for an agreed upon purpose, as specified by the donor. Investment earnings on such are recognized as temporarily restricted revenue until such earnings are appropriated for expenditure in accordance with the Organizations policies and procedures.

Net Patient Service Revenue Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as additional information becomes available or final settlements are determined.

Medicare Technology Stimulus Revenue The American Recovery and Reinvestment Act of 2009 provides for Medicare incentive payments for eligible hospitals and professionals that implement and achieve meaningful use of certified electronic health record (“EHR”) technology. For these EHR incentive payments, the Organization utilizes a grant accounting model to recognize these revenues. Under this accounting policy, EHR incentive payments were recognized as revenues when attestation that the EHR meaningful use criteria for the required period of time was demonstrated. Accordingly, the Organization recognized $1,314,327 of EHR revenues in the accompanying consolidated statement of operations for the year ended December 31, 2014. The Organization’s attestation of compliance with the meaningful use criteria is subject to audit by the government or its designee. Additionally, Medicare EHR incentive payments received are subject to retrospective adjustment upon final settlement of the applicable cost report from which payments were calculated.

- 10 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Charity Care and Community Benefit The Organization provides charity care to patients who meet certain financial criteria under the Organizations charity care policy and criteria established by the State of New York. The Organization provides care to patients who meet the criteria without charge or at amounts less than established rates. Because the Organization does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue. Charity care is estimated based on average cost per day. The estimated costs incurred to provide charity care under the Organization’s policy during the years ended December 31, 2015 and 2014, was approximately $337,417 and $116,569, respectively.

As a community-based service organization, certain programs are provided, such as the Think First Program, a free injury educational seminar targeted to children. In addition, the Organization provides free and discounted meeting room space and use of the Organization’s campus to not-for-profit health organizations. The Organization also provides free support groups and enrollment assistance in public programs. Annually, the Organization sponsors the Burke Wheelchair Games, a sporting event that targets both children and adults with disabilities. During this event, the Organization offers free admission for economically disadvantaged participants.

Donor-restricted Gifts and Grants Gifts of cash and other assets are reported as restricted support if they are received with donor stipulations that limit use of the donated assets. Grants restricted by grantors for particular operating purposes or for property, plant and equipment acquisitions are deemed to be earned and reported as temporarily restricted grant revenues when the expenditures have been incurred in compliance with the specific restrictions. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of operations as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reflected as unrestricted contributions in the accompanying consolidated financial statements.

Allowance for Uncollectible Accounts The Organization provides an allowance for uncollectible accounts for estimated losses resulting from the unwillingness or inability of patients or third-party payors to make payment for services. The allowance is determined by analyzing specific accounts and historical data and trends. Patient accounts receivable are charged off against the allowance for uncollectible accounts when management determines that recovery is unlikely and the Organization ceases collection efforts.

Fair Value Measurements The Organization measures fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 - Quoted prices are available in publicly traded markets for identical assets or liabilities as of the measurement date.

- 11 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Level 2 - Pricing inputs, including broker quotes, are generally those other than exchange quoted prices in publicly traded markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of valuation methodologies. Also included in Level 2 are investments measured using a NAV per share, or its equivalent, that may be redeemed at that NAV at the date of the statement of financial position or in the near term, which the Organization has generally considered to be within 90 days.

Level 3 - Pricing inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include hedge funds, private investment funds and partnership interests, which are required to provide the Organization with periodic audited financial statements. Also included in Level 3 are investments measured using NAV per share, or its equivalent, that can never be redeemed at NAV or for which redemption at NAV is uncertain due to lockup periods or other investment restrictions.

Due to/from Broker Due to/from broker includes net amounts receivable for securities transactions that have not settled and cash held at the broker at the date of the consolidated financial statements.

Income Taxes The Organization follows guidance that clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. This guidance provides that the tax effects from an uncertain tax position can only be recognized in the financial statements if the position is “more-likely-than-not” to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged.

The Organization is exempt from federal income tax under IRC section 501(c)(3), though it is subject to tax on income unrelated to its exempt purpose, unless that income is otherwise excluded by the Code. The Organization has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; to determine its filing and tax obligations in jurisdictions for which it was nexus; and to identify and evaluate other matters that may be considered tax positions. The tax years ending December 31, 2012, 2013, 2014, and 2015 are still open to audit for both federal and state purposes. The Organization has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements.

Reclassifications Certain amounts in the prior year consolidated financial statements have been reclassified to conform with the current year presentation. Such reclassification did not change total assets, liabilities, revenues or expenses or changes in net assets reflected on the prior year consolidated financial statements.

- 12 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, to clarify the principles for recognizing revenue and to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for these goods and services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. An entity will apply the amendments in this update using either a full retrospective application, which applies the standard to each prior period presented, on under the modified retrospective application, an entity recognizes the cumulative effect of initially applying the new standard as an adjustment to the opening balance sheet of retained earnings at the date of initial application. Revenue in periods presented before that date will continue to be reported under guidance in effect before the change. Currently, the American Institute of Certified Public Accountants Healthcare Revenue Recognition Task Force is interpreting ASU 2014-09 and its effects on the health care industry. The Organization has not determined the impact of ASU 2014-09 at this time.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. This standard requires all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the associate debt liability. This standard is effective for years beginning after December 15, 2015. This standard requires the entity apply the amendments in this update using a full retrospective application, which applies the standard to each prior period presented. The Organization has not determined the impact of ASU 2015-03 at this time.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires that most leased assets be recognized on the balance sheet as assets and liabilities for the rights and obligations created by these leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early application is permitted. An entity is required to apply the amendments in ASU 2016-02 under the modified retrospective transition approach. This approach includes a number of optional practice expedients, which are described in the final standard. Under these practical expedients, an organization will continue to account for leases that commence before the effective date in accordance with current GAAP, unless the lease is modified. However, lessees are required to recognize on the balance sheet leased assets and liabilities for operating leases at each reporting date. The Organization has not determined the impact of ASU 2016-02 at this time.

2. NET PATIENT SERVICE REVENUE

The Organization has agreements with third-party payors that provide for payments to the Organization at amounts different from its established rates. A summary of the payment arrangements with major third- party payors is as follows:

Medicare - The Organization is a 150-bed acute care facility having 120 beds designated for inpatient rehabilitation facility (“IRF”) use. The remaining 30 beds are for acute care use. The 120 IRF beds are reimbursed under the Medicare Case Mix Grouping (“CMG”) payment system. In order to qualify for CMG reimbursement, at least 60% of all patients admitted to the facility must have certain clinical characteristics that qualify them for rehabilitation treatment. As determined by CMS, the Organization’s IRF patient population was in compliance with this regulation for 2015 and 2014.

- 13 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

On October 3, 2015, the Organization closed its 30 bed acute care unit. On January 1, 2016, the Organization was re-established as a 150 bed inpatient rehabilitation facility (“IRF”), the aforementioned 30 beds were converted to a mixed neurological rehabilitation unit and the first patient was admitted to this unit on February 22, 2016.

Medicaid - Inpatient and outpatient services rendered to Medicaid program beneficiaries are reimbursed on a per diem basis. The per diem rates contain prospective adjustments for the current year to account for changes in costs and volume.

Other - Payment agreements have been entered into with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The basis for payment to the Organization under these agreements includes prospectively determined rates per discharge, discounts from established charges, and prospectively determined dailies.

Laws and regulations governing health care programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Noncompliance with such laws and regulations could result in fines, penalties, and exclusion from such programs. The federal government and many states have aggressively increased enforcement under Medicare and Medicaid antifraud and abuse legislation. Recent federal initiatives have prompted a national review of federally funded health care programs. The Organization has a compliance program to monitor conformance with applicable laws and regulations, but the possibility of future government review and interpretation exists. The Organization believes that it is in compliance, in all material respects, with all applicable laws and regulations and, is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation. Noncompliance with such laws and regulations could result in repayments of amounts improperly reimbursed, substantial monetary fines, civil and criminal penalties and exclusion from the Medicare and Medicaid programs.

- 14 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

3. ASSETS WHOSE USE IS LIMITED

At December 31, 2015 and 2014, assets whose use is limited consist of the following:

December 31, 2015 2014 Foundation funds: Equity securities $ 47,796,623 $ 52,786,567 Common trust funds/mutual funds 9,470,035 9,677,204 Limited partnerships 25,695,108 27,072,993 Due from broker 23,530 4,317,603 $ 82,985,296 $ 93,854,367 Trusteed funds: Cash and cash equivalents $ 543,486 $ 175,622 Equity securities 16,352,692 16,592,014 Common trust funds/mutual funds 2,498,155 2,565,911 Limited partnerships 5,323,336 5,683,932 Due (to) from broker (5,564) 1,228,098 $ 24,712,105 $ 26,245,577 Self-insurance trust: Cash and cash equivalents $ 33,353 $ 99,114 Fixed income 2,172,792 2,513,593 $ 2,206,145 $ 2,612,707

Restricted use - cash $ 223,435 $ 212,678 Depreciation fund - cash and cash equivalents $ 31,776 $ 31,776

- 15 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

2015 2014 Donor-restricted long term investments: Home Health Education Fund: Cash and cash equivalents $ 15,926 $ 7,513 Equity securities 258,853 282,200 Due to broker (2,025) (1,791) 272,754 287,922 Kennedy Duncan Fund: Cash and cash equivalents 148,660 91,734 Equity securities 1,760,930 1,868,065 Due from broker 169 689 1,909,759 1,960,488

Employee recognition fund - cash equivalents 104,607 104,592

Restricted - cash 1,115,980 513,327 Total donor-restricted long-term investments $ 3,403,100 $ 2,866,329

Total assets whose use is limited $ 113,561,857 $ 125,823,434

Investment return - net, including net realized and unrealized gains and losses on investments and cash and cash equivalents, are comprised of the following:

Year Ended December 31, 2015 2014

Unrestricted income on investments $ 2,194,550 $ 1,824,559 Realized gains on investments - net 738,601 3,863,183 Change in unrealized gains and losses on trading securities (8,689,840) (3,143,844)

$ (5,756,689) $ 2,543,898

4. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The Organization used the market approach as its valuation technique.

- 16 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

The following table summarizes the Organization’s financial instruments by levels and excludes amounts due (to) from broker disclosed in footnote 3:

December 31, 2015 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 12,761,148 $ - $ - $ 12,761,148 Fixed income securities (bond funds and CD’s) 2,478,196 - - 2,478,196 Equity oriented funds 42,625,658 23,324,524 218,915 66,169,097 Limited partnerships - 20,215,173 10,803,271 31,018,444 Common trust funds/mutual funds - 11,968,190 - 11,968,190 57,865,002 55,507,887 11,022,186 124,395,075 Interest rate cap - 236 - 236 $ 57,865,002 $ 55,508,123 $ 11,022,186 $ 124,395,311 Total assets

December 31, 2014 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 19,707,656 $ - $ - $ 19,707,656 Fixed income securities (bond funds and CD’s) 2,671,857 - - 2,671,857 Equity oriented funds 39,272,671 20,685,815 11,570,360 71,528,846 Limited partnerships - 20,187,300 12,569,625 32,756,925 Common trust funds/mutual funds - 12,243,115 - 12,243,115 61,652,184 53,116,230 24,139,985 138,908,399 Interest rate cap - 8,249 - 8,249 $ 61,652,184 $ 53,124,479 $ 24,139,985 $ 138,916,648 Total assets

For the years ended December 31, 2015 and 2014, purchases and sales of Level 3 investments were settled with Level 1 investments. During the year ended December 31, 2015, the Organization transferred $1,956,987 from Level 3 to Level 2 due to the expiration of the lock up period requirement of a fund. The following tables summarize changes in fair values associated with Level 3 investments for the years ended December 31, 2015 and 2014:

Net Realized and Balance at Unrealized Purchases Sales Transfers Balance at Level 3 Investments December 31, 2014 Gains (Losses) (Contributions) (Withdrawals) (Net) December 31, 2015

Equity - oriented funds $ 11,570,360 $ (15,167) $ 6,313 $ (9,385,604) $ (1,956,987) $ 218,915 Limited partnerships 12,569,625 (938,429) 186,700 (1,014,625) - 10,803,271 Total $ 24,139,985 $ (953,596) $ 193,013 $ (10,400,229) $ (1,956,987) $ 11,022,186

- 17 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Net Realized and Balance at Unrealized Purchases Sales Transfers Balance at Level 3 Investments December 31, 2013 Gains (Losses) (Contributions) (Withdrawals) (Net) December 31, 2014

Equity - oriented funds $ 17,192,655 $ (823,845) $ 2,038,268 $ (6,836,718) $ - $ 11,570,360 Limited partnerships 13,573,947 (1,662,322) 1,574,208 (916,208) - 12,569,625 Total $ 30,766,602 $ (2,486,167) $ 3,612,476 $ (7,752,926) $ - $ 24,139,985

The Organization uses the NAV per share or its equivalent to determine fair value of all underlying investments which: (a) do not have readily determinable fair value and (b) prepare their financial statements consistent with the measurement principle of an investment company or have the attributes of an investment company.

The following table lists investments by major category, in addition to the Organization’s outstanding capital commitments, which are due on demand, related to their investment in limited partnerships and equity oriented funds are as follows at December 31, 2015 and 2014:

Category Fair Value Fair Value Commitments Frequency Period Remaining Life

Equity oriented funds (a) $ 23,543,439 $ 32,256,175 $ 95,657 Monthly-Annually 30 - 60 days 91 days

Common trust funds/mutual Monthly- funds (b) 11,968,190 12,243,115 - Quarterly 15 - 95 days N/A

Ranges between 10 - Monthly or at 15 days and no Limited partnerships (c) 31,018,444 32,756,925 835,467 termination of fund redemption 1 - 5 Years $ 66,530,073 $ 77,256,215 $ 931,124

(a) Equity oriented funds: Investments are made up of equity investments in various limited liability companies and open end investment companies, some of which act as feeder funds. (b) Common trust funds/mutual funds: Investments are made up of various private investment funds, common trust funds, credit asset trust, corporate bond trust and investors trust. (c) Limited partnerships: Investments in limited partnerships.

The Organization’s investment portfolio is exposed to various risks, such as interest rate, market risk and credit risk. Because of the level of risk associated with such investments, changes in their values will occur and such changes could materially affect the amounts reported in the accompanying consolidated financial statements. The Organization values Level 3 investments based on the NAV, or its equivalent, reported within audited financial statements provided by the fund managers, when available. The reported fair value of Level 3 investments is sensitive to changes in the funds underlying NAV or its equivalent.

- 18 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

5. PERMANENTLY RESTRICTED NET ASSETS

Permanently restricted net assets consisted of the following at December 31, 2015 and 2014:

2015 2014 Kennedy Duncan Fund $ 387,585 $ 387,585 Home Health Education Fund 300,000 300,000 Employee Recognition Fund 100,000 100,000 Total $ 787,585 $ 787,585

Earnings on permanently restricted net assets are to be used in support of operations or specified program initiatives as stipulated by the respective donor.

Endowments - The endowment is composed of three permanently restricted endowments as of December 31, 2015 and 2014. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, if any, are classified and reported based on the existence or absence of donor-imposed restrictions.

Interpretations of Relevant Law - The Organization follows the New York Prudent Management of Institutional Funds Act (“NYPMIFA”), which requires the preservation of the fair value of the original gift, as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets: (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) the accumulations to the permanent endowment made in accordance with the directions of the applicable donor gift instrument, at the time the accumulation is added to the fund.

The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted nets assets until those amounts are appropriated for expenditure by the Organization’s Board of Directors in a manner consistent with the standard of prudence prescribed by NYPMIFA.

In accordance with NYPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: the purpose, duration, and preservation of the endowment fund; expected total return of investments; general economic conditions and the possible effect of inflation or deflation; other resources of the institution; and the investment policy of the institution.

- 19 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Changes in endowment funds and net assets for the years ended December 31, 2015 and 2014 consist of the following:

Temporarily Permanently Restricted Restricted Total Endowment funds and net assets, December 31, 2013 $ 1,733,946 $ 787,585 $ 2,521,531 Investment returns: Investment loss (13,980) - (13,980) Net appreciation 135,072 - 135,072 Total investment return 121,092 - 121,092 Appropriation of endowment investment return for expenditure (350) - (350) Endowment funds and net assets, December 31, 2014 1,854,688 787,585 2,642,273 Investment returns: Investment loss (9,920) (9,920) Net depreciation (87,579) - (87,579) Total investment return (97,499) - (97,499) Appropriation of endowment investment return for expenditure (150) - (150) Endowment funds and net assets, December 31, 2015 $ 1,757,039 $ 787,585 $ 2,544,624

Return Objectives and Risk Parameters - The Organization’s primary investment objectives are to invest its endowment principal to achieve growth of both principal value and income over time sufficient to preserve and/or increase the real (inflation adjusted) purchasing power of the assets, and to provide a stable source of perpetual financial support.

Strategies Employed for Achieving Objectives - The Organization relies on a total return strategy in which active equity managers/funds are expected to achieve an annualized total rate of return over a three-to-five- year period, which exceeds an agreed upon benchmark rate of return, net of costs and fees. Total return is defined as dividend and interest income plus realized and unrealized capital appreciation or depreciation. Active fixed income managers are expected to exceed appropriate market indices, net of costs and fees. When index funds are used, the return should closely track the appropriate index.

Funds with Deficiencies - From time to time, the fair value of assets associated with individual donor- restricted endowment funds may fall below the level that the donor or NYPMIFA requires the Organization to retain as a fund of permanent duration. At December 31, 2015 and 2014, there were no aggregate deficiencies of this nature reported within restricted net assets.

- 20 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2015 and 2014, is as follows:

2015 2014

Land $ 176,475 $ 176,475 Land improvements 6,570,589 6,283,451 Buildings 61,098,750 59,181,193 Fixed equipment 28,316,628 28,241,972 Major movable equipment 45,275,189 42,748,198 141,437,631 136,631,289 Less accumulated depreciation and amortization (110,928,737) (105,596,547) 30,508,894 31,034,742 Construction in progress 195,980 357,101 $ 30,704,874 $ 31,391,843

Depreciation and amortization expense on property, plant and equipment was $5,345,805 and 5,346,242 at December 31, 2015 and 2014, respectively.

At December 31, 2015 and 2014, included in property, plant and equipment is equipment recorded under a capital lease arrangement with an original cost of $2,882,000. Accumulated amortization on the leased equipment was approximately $1,179,571 and $1,030,418 at December 31, 2015 and 2014, respectively.

7. LONG-TERM DEBT

Long-term debt as of December 31 consisted of:

2015 2014 Term loan $ 5,211,911 $ 5,559,372 Capital lease collateralized by related equipment for cogeneration plant with the Dormitory Authority of New York State Tax Exempt Leasing Program (“TELP”), with an interest rate of 5.94% and monthly payments through March 2018 620,090 870,346 5,832,001 6,429,718 Less current portion (612,924) (597,718) $ 5,219,077 $ 5,832,000

- 21 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

The Institute had a term loan with a financial institution which was used for renovations to the Institute’s “Sturgis” building. The total amount of the term loan was $6,949,216 and had monthly principal payments that began in January 2011 of $28,988, with a balloon payment due January 1, 2018 of $4,515,408. The term loan has a variable interest rate based on monthly LIBOR plus 1.75% (1.99% and 1.90% at December 31, 2015 and 2014, respectively). The term loan is collateralized by certain investments held by the Organization at 110% of the outstanding amount. The term loan had certain financial covenants which are required to be maintained on a quarterly basis. On January 25, 2016, the term loan balance was paid off and refinanced with another financial institution. The new loan principal is $7,700,000. The term loan has a variable interest rate based on monthly LIBOR plus 0.95%. The monthly principal payments are $25,667 and the calculation is based on a 25 year amortizing with a balloon payment due by January 1, 2026. The new loan is collateralized by certain investments held by the Foundation at 200% of the outstanding amount. The additional funds over the refinanced amount will be used for renovations to the Institute’s “Molecular” building.

Additionally, the Institute had an interest rate cap agreement with a financial institution, to limit the impact of increases in the interest rate on their term loan. The notional amount was $6,000,000 and $6,400,000 at December 31, 2015 and 2014, respectively. This agreement limits the Organization’s exposure to increasing interest rates by providing a cap at 3.75% per annum. This interest rate cap was settled in 2016 concurrently with the term loan being refinanced.

Additionally, on January 25, 2016, the Institute entered into a new interest rate cap agreement with a financial institution, to limit the impact of increases in the interest rate on their new loan. The notional amount is $7,700,000. This agreement limits the Institute’s exposure to increasing interest rates by providing a cap at 2.95% per annum.

The interest rate cap agreement matures at the time the term loan matures. The fair value of the interest rate cap agreement on December 31, 2015 and 2014 was estimated to be $236 and $8,248, respectively, and is separately shown as a non-current asset in the consolidated statement of financial position. The Institute may be exposed to credit loss in the event of nonperformance by the counterparty to the interest rate cap agreement. However, the Institute does not anticipate nonperformance as its counterparty is rated Aa1 by Moody’s.

On April 5, 2016, the Hospital established a $3,000,000 line of credit with a financial institution at a borrowing rate of prime minus 75 basis points. The line is secured by investments held in assets whose use is limited - Trusteed funds at 200%. As of May 31, 2016, $850,000 was outstanding.

- 22 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Future minimum payments on the long-term debt as of December 31, 2015, are as follows:

Capital Lease Years New Term Loan Old Term Loan Obligation

2016 $ 282,333 $ 347,461 $ 296,469 2017 308,000 347,461 296,469 2018 308,000 4,516,989 74,117 2019 308,000 - - 2020 308,000 - - Therafter 6,185,667 - -

Total 7,700,000 5,211,911 667,055

Less amount representing interest on capital lease obligation - - (46,966)

$ 7,700,000 $ 5,211,911 $ 620,089

8. SELF-INSURANCE LIABILITIES

The Organization has a professional and general liability self-insurance program on a claims-made basis for limits of $1,000,000 per claim and $3,000,000 in the annual aggregate. Organization also purchases commercial excess insurance coverage above these limits of coverage. This program is maintained and funded through the means of a self-insurance trust, managed by an independent fiduciary, and set up for the purpose of the payment of applicable claims from this program. An independent actuary calculates liabilities in the trust. The estimated liability for this reserve is approximately $1,497,700 and $1,938,000 at December 31, 2015 and 2014, respectively. Concurrent with the Montefiore transaction, the Foundation and Institute withdrew from the self-insurance program and entered into a commercial risk insurance policy. As part of the withdrawal agreement, the Foundation and Institute purchased tail coverage from the self- insurance program for any prior claims.

The Organization also maintains an accrual, calculated at an expected confidence level of loss and discounted basis, of approximately $733,200 and $1,166,000, for the period coverage as of December 31, 2015 and 2014, respectively. The Organization has accrued its best estimate of the ultimate cost of losses payable under its self-insurance program at estimated present value based on a discount rate of 3.05% and 3.15% at December 31, 2015 and 2014, respectively.

9. ACCRUED RETIREMENT BENEFITS

The Hospital has a noncontributory defined benefit pension plan (the “Plan”) covering substantially all its employees. The benefits are based on years of service and the employees’ compensation during the last five years of covered employment. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. The mortality table used for projecting the benefit obligation is the RP-2014 Mortality table with Scale MP-2015. The Hospital also sponsors a supplemental retirement plan (the “SERP”) for certain executives. In 2016, $1,734,765 was paid - 23 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

to settle and terminate the SERP. The Hospital’s funding policy is to contribute annually an amount no less than the minimum amount required by ERISA.

In addition to the Hospital’s defined benefit pension plan, the Hospital provides postretirement medical and life insurance benefits (“OPEB”). To be eligible for the medical benefits, the employee must be at least 65 years old and a participant in the defined benefit pension plan. To be eligible for the life insurance benefits, the employee must be at least 55 years old and vested in the defined benefit pension plan. The Hospital funds these benefit costs on a pay-as-you-go basis.

The following table sets forth the plans, funded status, and amounts recognized in the consolidated financial statements:

Defined Benefit Plans Other Postretirement Benefits 2015 2014 2015 2014

Obligations and funded status: Hospital’s contributions $ 3,659,875 $ 2,750,117 $ 126,068 $ 119,866 Benefit payments (4,114,087) (3,839,910) (126,068) (119,866)

Unfunded status - end of year - amount recognized in the consolidated statements of financial position (52,695,998) (53,690,154) (5,374,061) (5,706,710)

Benefit obligation and fair value of plan assets are as follows: Projected benefit obligation (117,402,254) (121,959,760) (5,374,061) (5,706,710)

Accumulated benefit obligation (116,152,850) (120,976,365) - -

Fair value of plan assets 64,436,256 68,269,606 - -

Other accrued retirement benefits adjustment (2,362,606) 28,051,237 (461,154) 1,626,851

Service cost $ 2,490,849 $ 1,737,471 $ 199,699 $ 144,984 Interest cost 4,623,432 4,555,896 213,828 210,332 Expected return on plan assets (5,425,400) (5,331,704) - Amortization of prior service cost (520,999) (520,999) (150,824) (150,824) Recognized actuarial loss (gain) 4,130,443 1,427,706 (8,130) (115,904)

Net periodic benefit cost $ 5,298,325 $ 1,868,370 $ 254,573 $ 88,588

At December 31, 2015, the expected estimated aggregate amount from unrestricted net assets into net periodic benefit cost related to net actuarial loss and prior service cost is $3,715,923 and $671,823, respectively.

- 24 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Weighted-average assumptions used in determining the benefit obligation at December 31, 2015 and 2014, were as follows:

Other Postretirement Defined Benefit Plans Benefits Assumptions 2015 2014 2015 2014

Weighted-average assumptions used in computing benefit obligation at December 31: Discount rate 4.34 % 3.99 % 4.21 % 3.89 % Rate of compensation increase 2.50 2.50 - - Initial health care cost trend rate - - 3.00 3.00 Ultimate trend rate in 2016 and forward - - 3.00 3.00

Weighted-average assumptions used in computing benefit obligation at December 31: Discount rate 3.99 % 5.09 % 3.89 % 5.10 % Rate of compensation increase 2.50 2.50 - - Initial health care cost trend rate - - 3.00 3.00 Ultimate trend rate in 2015 and forward - - 3.00 3.00

To develop the expected long-term rate of return on plan assets, the Hospital considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This approach resulted in the selection of the 8.00% long-term rate of return on plan assets assumption.

The measurement date used to determine the Plan measurements is December 31.

The Plan’s weighted-average asset allocation at December 31, 2015 and 2014 is as follows:

2015 2014

Equity securities 44 % 46 % Common trusts funds/mutual funds 28 27 Cash and cash equivalents 3 2 Limited partnerships 25 25 100 % 100 %

- 25 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Fair Values of Plan Assets The following table presents the Hospital’s categorization of the assets of the Plan within the fair value hierarchy using the market approach valuation technique at December 31, 2015 and 2014:

December 31, 2015 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 2,108,570 $ - $ - $ 2,108,570 Equity securities (a) 14,626,483 13,787,564 - 28,414,047 Common trust funds/mutual funds (b) 11,319,841 6,617,841 - 17,937,682 Limited Partnership (c) - 15,975,957 - 15,975,957 $ 28,054,894 $ 36,381,362 $ - $ 64,436,256

December 31, 2014 Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 1,159,482 $ - $ - $ 1,159,482 Equity securities (a) 12,651,258 18,738,109 - 31,389,367 Common trust funds/mutual funds (b) 11,840,516 6,790,811 - 18,631,327 Limited Partnership (c) - 17,089,430 - 17,089,430 $ 25,651,256 $ 42,618,350 $ - $ 68,269,606

(a) Comprised of various equity securities which include private equity securities, U.S. and foreign large, mid-cap and small-cap equities. (b) Comprised of debt securities in publicly and privately held mutual funds. (c) Comprised of investments in limited partnership.

The Plan had unfunded capital commitments of $27,380 at December 31, 2015.

Target Allocations The Plan’s targeted asset allocation is as follows:

Min % Target % Max %

Asset Class Growth assets, U.S. Equity, International Equity, Hedge Funds, Private Equity 50 % 70 % 80 % Fixed Income - 10 20 Real Assets Commodities, Real Estate, MLP’s 10 20 30 Cash 10 - 10

- 26 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Contributions The Hospital’s required contributions to the defined benefit plans and the postretirement plan in 2016 are approximately $3,820,000 and $155,000, respectively. These contributions represent the amount necessary to meet expected benefit payments for those individuals who are expected to terminate or retire during 2016 and who become eligible for a benefit.

Estimated Future Benefit Payments Future benefit payments by the Plan and OPEB, reflective of expected future service, are expected to be paid as follows:

Fiscal Years Ending December 31, Plan OPEB 2016 $ 4,928,676 $ 155,217 2017 5,151,232 164,631 2018 5,440,128 173,516 2019 5,785,469 186,878 2020 6,080,381 202,934 2021 - 2025 33,609,116 1,223,900

Defined Contribution Plan - The Institute has a defined contribution benefit plan covering substantially all of its employees. Benefits are provided by fixed-dollar annuities issued to each participant. Contributions are made automatically based on a percentage of the participant’s regular salary in accordance with the following schedule:

On Portion of On Salary Above Salary within Social Social Security Security Wage Base Wage Base

Under age 40 5 10 Age 40-49 10 15 Age 50 and above 15 20

The Institute’s benefit expense for the defined contribution plan for the years ended December 31, 2015 and 2014, was approximately $457,273 and $259,627, respectively.

10. CONCENTRATION OF CREDIT RISK

The Hospital provides health care services through its inpatient and outpatient care facilities. The Hospital grants credit without collateral to patients, substantially all of who are local residents; however, it routinely obtains assignment of (or is otherwise entitled to receive) patients’ benefits payable under their health insurance programs, plans, or policies (e.g., Medicare, Medicaid, Blue Cross, health maintenance organizations, and commercial insurance policies).

- 27 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

Patient accounts receivable by financial class as a percentage of total patient accounts receivable at December 31, 2015 and 2014, are as follows:

2015 2014

Medicare 37 % 44 % Blue Cross 14 19 Medicaid 1 1 Other third-party payors 46 33 Patients 2 3 100 % 100 %

The Medicare program approximated 65% and 67% of net patient service revenue for the years ended December 31, 2015 and 2014, respectively.

11. COMMITMENTS AND CONTINGENCIES

Operating Leases - The minimum lease commitments for the Hospital’s various equipment and facilities under non-cancelable operating leases are in effect as of December 31, 2015, as follows:

Years 2016 $ 668,271 2017 492,289 2018 407,366 2019 203,017 2020 90,778 Thereafter 25,016

Total $ 1,886,737

Rental expense for the Hospital amounted to $658,671 and $692,393 for the years ended December 31, 2015 and 2014, respectively.

Litigation - The Hospital is involved in litigation arising in the course of business. After consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on the Hospital’s future consolidated financial position or results of operations.

- 28 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Consolidated Statements December 31, 2015 and 2014

12. FUNCTIONAL EXPENSES

The Organization provides rehabilitative health care services to patients and related support activities as described in Note 1. Expenses related to providing these services, included in the consolidated statements of operations at December 31, 2015 and 2014, are as follows:

2015 2014

Health care services $ 49,554,402 $ 48,268,808 General and administrative 31,988,552 29,608,129 Research 9,922,938 8,326,831

Total expenses $ 91,465,892 $ 86,203,768

13. SUBSEQUENT EVENTS

The Organization evaluated its December 31, 2015 consolidated financial statements for subsequent events through May 31, 2016, the date the consolidated financial statements were issued. The Organization is not aware of any subsequent events which would require recognition or disclosure in the accompanying consolidated financial statements, except for those items described elsewhere in the notes.

- 29 -

SUPPLEMENTARY INFORMATION

THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Net Patient Service Revenue For the years ended December 31, 2015 and 2014

2015 2014 Inpatient Outpatient Total Inpatient Outpatient Total

ROUTINE PATIENT CARE $ 60,682,450 $ - $ 60,682,450 $ 60,955,900 $ - $ 60,955,900

PHYSICIAN FEES 2,568,919 1,086 2,570,005 2,448,712 395 2,449,107

OTHER PROFESSIONAL SERVICES Radiology - diagnostic 495,912 197,930 693,842 580,900 220,307 801,207 Laboratory 2,591,538 - 2,591,538 2,698,548 - 2,698,548 Electrocardiography 433,893 1,598,608 2,032,501 452,126 1,490,812 1,942,938 Physical therapy 12,614,010 16,320,996 28,935,006 13,199,079 15,126,968 28,326,047 Respiratory therapy 3,269,221 - 3,269,221 2,918,093 - 2,918,093 Occupational therapy 11,384,243 1,481,842 12,866,085 11,651,279 1,311,159 12,962,438 Central services 1,636,812 8,236 1,645,048 1,572,249 7,706 1,579,955 Pharmacy 5,079,326 23,444 5,102,770 4,919,834 22,513 4,942,347 Speech and hearing 2,295,748 772,646 3,068,394 2,276,457 658,235 2,934,692 Orthotics and prosthetics 191,851 1,013 192,864 210,229 - 210,229 Other 13,844 - 13,844 - - -

Total other professional services 40,006,398 20,404,715 60,411,113 40,478,794 18,837,700 59,316,494

Total patient care revenue - gross charges 103,257,767 20,405,801 123,663,568 103,883,406 18,838,095 122,721,501

LESS CONTRACTUAL ALLOWANCES (51,438,277) (11,518,970) (62,957,247) (52,326,960) (9,268,368) (61,595,328)

Net patient service revenue $ 51,819,490 $ 8,886,831 $ 60,706,321 $ 51,556,446 $ 9,569,727 $ 61,126,173

- 31 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Other Revenue and Net Assets Released from Restrictions - Operations For the years ended December 31, 2015 and 2014

2015 2014 OTHER REVENUE Employees’ benefit contributions $ 1,137,057 $ 902,132 Purchase discounts 19,782 9,921 Sale of medical abstracts 4,398 2,344 Community fitness center 518,268 567,285 Rental of space 1,096,419 1,062,132 Apartment housing rental 452,188 445,775 Offsite programs 2,696,410 2,702,084 Miscellaneous 8,738 10,025

Total other revenue $ 5,933,260 $ 5,701,698

NET ASSETS RELEASED FROM RESTRICTIONS - OPERATIONS Accorda Studies $ 7,703 $ 12,428 Balcofen Study 10,747 - Kohlberg Grant 14,295 51,041 Neuro Rehab Fellowship - 120,000 Gift Shop 35,312 47,112 Wheelchair Athletics 25,450 22,311 Will Rogers Pulmonary Fund 65,000 80,000 Yale Iris Study 45,390 33,556 Other 23,078 31,594

Total net assets released from restrictions - operations $ 226,975 $ 398,042

- 32 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Changes in Temporarily Restricted Net Assets - Specific Purpose Fund For the years ended December 31, 2015 and 2014

Net Assets Released Net Assets from Restrictions Net Assets December 31, Investments Capital December 31, 2014 Contributions Return Operations Acquisitions 2015 Audio-visual Laboratory $ 753 $ - $ - $ 753 $ - $ - Accorda Studies - 7,703 - 7,703 - - After Care Case Management - 20,000 - 381 - 19,619 Alzheimer's Research - 105,000 - - - 105,000 Anthrotronix Study - 24,000 - - - 24,000 ARA Research Institute 15,815 - - - - 15,815 Baclofen Study 24,730 4,170 - 10,747 - 18,153 Kohlberg Grant 19,682 - - 14,295 - 5,387 Bioness Therapy - 10,000 - - - 10,000 Burke Gift Shop 145,962 62,771 462 35,312 28,938 144,945 Child Care Fund 454 - - 454 - - Design for Disabled 1,772 - - 710 - 1,062 Employee Recreation 1,926 7,593 15 7,873 - 1,661 Goldstein Foundation 50,000 - - - - 50,000 Gisondi Alz Rehab 35,000 - - - - 35,000 Heart Monitor Fund 3,273 - - - - 3,273 Home Health Education Fund 135,453 - (15,168) - - 120,285 IMPAX Spinal Cord Injury 3,250 - - - - 3,250 Kennedy Duncan Fund 1,719,102 - (82,346) - - 1,636,756 Leahy Pulmonary Fund 105,854 7,760 - 350 1,472 111,792 Medical Director 39,167 - - - 20,254 18,913 Myerson/ Memory Evaluation Fund 89 75,777 - 89 - 75,777 Novella Clinic Study 24,378 - - 1,650 - 22,728 Nuero Rehab Fellowship - 56,000 - - - 56,000 Patient Greenhouse Fund 2,004 2,770 - 72 - 4,702 Pediatric Concussion Study - 5,000 - - - 5,000 Prosthetic Fund 31,442 3,540 - 1,250 - 33,732 Quintiles Drug Study - E2020 499 - - - - 499 Opteminsight 950 - - - - 950 Rheumatology 5,879 - - - - 5,879 Social Service 30,997 109,939 - 4,262 12,682 123,992 Speech and Hearing 10,275 - - - - 10,275 Spinal Cord Studies 4,986 - - 1,234 - 3,752 Sports Neurology 6,465 - - - - 6,465 Vocational Education 2,487 - - - - 2,487 Volunteers Fund 15,095 7,800 - 1,000 2,171 19,724 Wheelchair Athletics 171,697 49,400 - 25,450 1,745 193,902 Will Rogers Fund - 65,000 - 65,000 - - Yale IRIS Study 13,525 38,752 - 48,390 - 3,887 $ 2,622,961 $ 662,975 $ (97,037) $ 226,975 $ 67,262 $ 2,894,662

- 33 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Expenses For the years ended December 31, 2015 and 2014

2015 2014 Salaries Supplies and Salaries Supplies and and Wages Other Expenses Total and Wages Other Expenses Total MEDICAL REHABILITATION SERVICES NURSING AND MEDICAL General nursing $ 12,413,242 $ 560,619 $ 12,973,861 $ 12,587,553 $ 594,447 $ 13,182,000 Medical services 8,454,946 1,427,884 9,882,830 8,130,624 1,246,589 9,377,213 Admitting 269,020 4,942 273,962 260,649 5,324 265,973 General services 92,856 254,253 347,109 87,611 328,714 416,325 Total nursing and medical 21,230,064 2,247,698 23,477,762 21,066,437 2,175,074 23,241,511 OTHER PROFESSIONAL Radiology - diagnostic 172,007 141,195 313,202 165,724 153,549 319,273 Laboratory - 699,115 699,115 - 759,502 759,502 Electrocardiography 228,906 34,222 263,128 223,361 47,327 270,688 Physical therapy 4,802,930 158,357 4,961,287 4,725,190 179,984 4,905,174 Occupational therapy 2,667,070 67,978 2,735,048 2,619,090 61,281 2,680,371 Pharmacy 967,605 1,137,882 2,105,487 910,781 1,153,006 2,063,787 Speech and hearing 863,770 14,395 878,165 835,678 12,372 848,050 Orthotics and prosthetics - 141,116 141,116 - 171,553 171,553 Medical records 291,348 50,102 341,450 276,368 69,375 345,743 Social service 790,173 26,557 816,730 783,043 20,569 803,612 Total other professional 10,783,809 2,470,919 13,254,728 10,539,235 2,628,518 13,167,753 AMBULATORY CARE 93,908 480 94,388 92,416 798 93,214 GENERAL SERVICES Dietary 1,382,699 1,152,469 2,535,168 1,363,939 1,151,740 2,515,679 Operation and maintenance of plant 1,934,618 2,062,120 3,996,738 1,881,572 2,095,261 3,976,833 Housekeeping 1,046,020 415,046 1,461,066 1,026,883 420,998 1,447,881 Laundry and linen 94,273 8,196 102,469 97,533 2,795 100,328 Total general services 4,457,610 3,637,831 8,095,441 4,369,927 3,670,794 8,040,721

- 34 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Expenses For the years ended December 31, 2015 and 2014

2015 2014 Salaries Supplies and Salaries Supplies and and Wages Other Expenses Total and Wages Other Expenses Total MEDICAL REHABILITATION SERVICES ADMINISTRATIVE AND FISCAL SERVICES Executive office $ 942,899 $ 1,334,647 $ 2,277,546 $ 600,949 $ 1,526,193 $ 2,127,142 Fiscal office 2,358,985 176,884 2,535,869 2,170,388 528,589 2,698,977 Personnel 541,293 289,201 830,494 531,644 255,971 787,615 Purchasing and storeroom 233,639 5,091 238,730 225,294 4,932 230,226 Communication 126,565 148,842 275,407 123,991 128,489 252,480 Volunteer service 73,585 3,728 77,313 71,724 2,823 74,547 Data processing 1,102,788 1,219,214 2,322,002 1,106,904 1,229,930 2,336,834 Insurance - 82,442 82,442 - 706,768 706,768 Public relations 190,178 990,451 1,180,629 179,647 741,114 920,761 Development 306,374 150,256 456,630 410,475 229,731 640,206 Corporate Restructuring Costs ------Total administrative and fiscal services 5,876,306 4,400,756 10,277,062 5,421,016 5,354,540 10,775,556 PROVISION FOR BAD DEBTS - 290,078 290,078 - 203,418 203,418 EMPLOYEE BENEFITS Pension and other postretirement benefit expenses - 6,403,711 6,403,711 - 2,703,226 2,703,226 Federal Insurance Contributions Act taxes - 3,074,980 3,074,980 - 3,035,473 3,035,473 Health insurance - 6,359,648 6,359,648 - 6,163,832 6,163,832 Workers’ compensation insurance - 680,837 680,837 - 561,716 561,716 Unemployment insurance - 53,501 53,501 - 40,542 40,542 Disability insurance - 42,721 42,721 - 47,779 47,779 Total employee benefits - 16,615,398 16,615,398 - 12,552,568 12,552,568 INTEREST - 45,593 45,593 - 59,964 59,964 DEPRECIATION AND AMORTIZATION - 3,864,208 3,864,208 - 3,939,144 3,939,144 Total medical rehabilitation services 42,441,697 33,572,961 76,014,658 41,489,031 30,584,818 72,073,849

- 35 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Expenses For the years ended December 31, 2015 and 2014

2015 2014 Salaries Supplies and Salaries Supplies and and Wages Other Expenses Total and Wages Other Expenses Total

MEDICAL REHABILITATION SERVICES FOUNDATION SERVICES Grantor services $ - $ 5,206,624 5,206,624 $ - $ 4,927,671 $ 4,927,671 Management and general - 566,914 566,914 - 559,175 559,175

Total foundation services - 5,773,538 5,773,538 - 5,486,846 5,486,846

MEDICAL RESEARCH SERVICES Medical research 4,485,291 4,112,879 8,598,170 4,052,442 3,220,758 7,273,200 Employee benefits - medical research - 1,324,768 1,324,768 - 1,181,961 1,181,961 Management and general 1,549,159 2,968,319 4,517,478 1,629,951 2,804,780 4,434,731 Interest expense - 106,101 106,101 - 110,457 110,457 Employee benefits - management and general - 459,720 459,720 - 475,402 475,402 Salary and employee benefits - other 131,165 - 131,165 437,000 (159,318) 277,682 Depreciation - 1,481,598 1,481,598 - 1,407,097 1,407,097

Total medical research services 6,165,615 10,453,385 16,619,000 6,119,393 9,041,137 15,160,530

Subtotal expenses 48,607,312 49,799,884 98,407,196 47,608,424 45,112,801 92,721,225

CONSOLIDATING ENTRIES - (6,941,304) (6,941,304) - (6,517,457) (6,517,457)

Consolidated expenses $ 48,607,312 $ 42,858,580 $ 91,465,892 $ 47,608,424 $ 38,595,344 $ 86,203,768

- 36 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Refundable Advances and Grant Revenue For the years ended December 31, 2015 and 2014

Refundable Gifts Refundable Advances Donations Expenditures Consortiums/ Reclasses Advances December 31, and Federal Direct Indirect Equipment and December 31, Account Name 2014 Grants Grants Costs Costs Additions Transfers 2015

PRIVATE GRANTS Eisai -Jordan $ 1,478 $ - $ - $ - $ - $ - $ (1,478) - National Parkinsons 5,000 ------5,000 Overbrook 11,466 - - - - - (11,466) - Cardiac Fund 8,318 ------8,318 Forest Pharmaceutical 277 - - 125 14 - (138) - Scallon 157 ------157 Korean University 57 ------57 Animal Care Center 177,864 - - 19,446 - - - 158,418 Fujisawa Corp 1,265 - - - - - (1,265) - Mitro Defects - Gibson 5,015 - - 3,518 - - - 1,497 Mt. Sinai 10,352 - - - - - (10,352) - Anti-Micro - - - (1,062) - - (1,062) - NR2 - 35,898 - - - - (35,898) - Hartman Foundation 31,941 - - 18,204 - - - 13,737 Wyeth Acute Stroke Study - - - (56,103) - - (56,103) - Wyeth Training Study - - - (24,120) - - (24,120) - IRSF Fund 1,486 ------1,486 Don Sperling Fund 28,655 500 - - - - - 29,155 Allen & Co Goldfine 4,447 ------4,447 Novartis Jordan 51,078 - - - - - (51,078) - Dana Foundation - Ratan 13,860 - - 72,160 - - 58,300 -

The accompanying notes are an integral part of these consolidated financial statements. - 37 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Refundable Advances and Grant Revenue For the years ended December 31, 2015 and 2014

Refundable Gifts Refundable Advances Donations Expenditures Consortiums/ Reclasses Advances December 31, and Federal Direct Indirect Equipment and December 31, Account Name 2014 Grants Grants Costs Costs Additions Transfers 2015

Reeve Foundation $ 12,446 $ - $ - $ - $ - $ - $ - 12,446 Johnson & Johnson 7,523 ------7,523 Carmel Funds 61,011 31,180 - 24,771 - - - 67,420 March of Dimes 1,045 - - 568 56 - - 421 Adelson Foundation - 729,402 - 484,585 - - (29,257) 215,560 American Diabetes Assoc. 2,488 ------2,488 Stealth Peptides - - - 14,142 2,828 - 16,970 - Adelson Langley - 627,614 - 270,501 - 67,283 (18,112) 271,718 Visual Rehab 12,465 ------12,465 Reeve Foundation - Zhong 250 ------250 Pacific Northwest Labs - 12,273 - 12,273 749 - 749 - Restore Neuro Clinic 114,535 362,999 - 282,762 48,070 14,500 - 132,202 Clinical SCI PR 14,485 5,007 - 6,370 - - - 13,122 Adelson - Edwards 76 75,000 - - - - - 75,076 Brain Map Study Labar 2,386 ------2,386 Retinal Photo - Prusky 2,668 ------2,668 USMA - O'Donovan 48,886 - - 48,886 - - - - Carvel - Friel 75,966 - - 72,199 - 2,550 - 1,217 Carvel - Donohoe 41,667 - - 41,669 - - 2 - Carvel - Carmel 53,210 - - 61,315 - - 8,105 - Carvel - Prusky 40,101 - - 36,650 - 4,864 1,413 - Skirball - Edwards 64,687 1,250 - 63,751 - 6,450 4,264 - NRF Korea 31,022 - - 15,489 - - - 15,533 Retinal Research 26,715 20,000 - - - - - 46,715 Willis Reseach Fund 7,050 ------7,050 Goldsmith D (51,157) - - 31,176 - - - (82,333) Run 4 Brad 218,547 155,659 - 94,290 - 146,036 (182) 133,698 Travis Roy Fund 45,348 124,719 - 123,393 - 17,308 - 29,366

The accompanying notes are an integral part of these consolidated financial statements. - 38 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Refundable Advances and Grant Revenue For the years ended December 31, 2015 and 2014

Refundable Gifts Refundable Advances Donations Expenditures Consortiums/ Reclasses Advances December 31, and Federal Direct Indirect Equipment and December 31, Account Name 2014 Grants Grants Costs Costs Additions Transfers 2015

Nexstim NBT Fund $ - $ 328,415 $ - $ 223,547 $ 38,003 $ 33,755 $ (33,110) $ - Ashen Fund - Carmel 113,796 - - 38,434 - 46,515 - 28,847 Ashen Fund - Donohoe 114,836 - - 111,116 - - - 3,720 Ashen Fund - Gupta 142,643 - - 38,997 - - - 103,646 Vagus Nerve Stimulation - 74,100 - 23,595 22,415 - (28,090) - Neilsen Foundation 75,000 120,000 - 145,275 14,528 5,657 - 29,540 Cornell Auditory Attention - 44,930 - 41,800 - - (3,130) - Regeneron Autoimmune - 48,800 - 44,663 13,399 634 9,896 - JDRF Neuro Vascular 35,955 10,997 - 41,569 4,141 - - 1,242 Cornell D Beta Hydroxy - 52,530 - 25,730 - - (26,800) - Harvey Kelsey Fund 2,300 - - - - - 2,300 Wings for Life Fund 50,340 85,864 - 89,665 - 29,539 - 17,000 Sci Infra Hill Fund - 81,127 - 35,723 - 6,038 (39,366) - Sci Infra Willis Fund - 125,000 - 26,320 - - (98,680) - Daedalus Fund - - - 16,988 - - 16,988 - ADDF Benfotimine Fund 97,084 125,000 - 240,944 - 6,047 24,907 - Donohoe Private Funds 6,250 - - 4,240 - - - 2,010 SCI Equipment - - - - 584,681 589,540 4,859 Putrino Private Funds 10,000 - - 889 - - - 9,111 NYS Legislative Hill - 35,439 - 33,314 - - - 2,125 NYS Legislative Willis - 35,439 - 35,000 - - - 439 NYS Legislative Carmel - 35,439 - 4,126 - 24,020 (6,854) 439 NYS Legislative Zhong - 35,441 - 34,998 - - - 443 NYS Legislative Langley - 35,439 - 35,000 - - - 439 NYS Legislative Edwards - 35,439 - 35,000 - - - 439 Willis Private Grants - - - 42,216 - - 42,216 - Hill Private Grants - - - 28,460 - - 28,460 - Blythdale Fund - 93,468 - 187,583 - - 94,115 - CTSC Hill - 43,922 - 49,999 - - 6,077 - Stroke Putrino - - - 6,010 - - 6,010 -

The accompanying notes are an integral part of these consolidated financial statements. - 39 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Refundable Advances and Grant Revenue For the years ended December 31, 2015 and 2014

Refundable Gifts Refundable Advances Donations Expenditures Consortiums/ Reclasses Advances December 31, and Federal Direct Indirect Equipment and December 31, Account Name 2014 Grants Grants Costs Costs Additions Transfers 2015

Cornell Schaffer $ - $ 17,117 $ - $ 8,111 $ - $ - $ - $ 9,006 TEVA Ratan - 5,000 - - - - - 5,000 Jewish General Hospital - - - 7,337 - - 7,337 - American Heart Yang - 11,600 - 23,206 - - 11,606 - Grehan Fund - 25,000 - - - - - 25,000 Australia Project - 6,737 - 1,600 - - - 5,137 Not Impossible - 82,868 - 33,567 3,357 - - 45,944 Neilsen Dystrophic Axons - 150,000 - 13,806 1,381 - - 134,813 NYS Idea Willis - - - 40,220 8,044 - 48,264 - NYS Idea Carmel - - - 17,121 3,424 36,703 57,248 - Blythedale Brain Injury - - - 196 - - 196 - NYS Retinal Study - 180,351 - 197,509 39,502 - 56,660 - NYS Alzheimer’s Imaging - 39,156 - 39,156 - - - - Stroke Research 21,608 400 - 5,218 - - - 16,790 NYS SCIRB - Langley 1,231 ------1,231 Alzheimer’s Disease - Shi ------NYS Alzheimer's Disease - Jordon - 135,978 - 104,370 - - (31,608) - Alzheimer's Research 9,441 200 - - - - - 9,641 Acorda Carmel 27,398 47,339 - 61,850 15,462 17,479 20,054 - Research Fund 18,010 120 - - - - - 18,130 Medical Directors Fund 31,625 18,454 - 19,283 - 41,560 12,270 1,506 Burke Foundation Grant 12,070 200 - - - - (12,270) - Goldsmith Foundation A 53,033 - - 45,065 - - - 7,968 Goldsmith Foundation B 109,909 ------109,909 Goldsmith Foundation C 51,250 ------51,250

Total private grants $ 2,169,915 $ 4,348,810 $ - $ 3,975,774 $ 215,373 $ 1,091,619 $ 601,228 $ 1,837,187

The accompanying notes are an integral part of these consolidated financial statements. - 40 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Refundable Advances and Grant Revenue For the years ended December 31, 2015 and 2014

Refundable Gifts Refundable Advances Donations Expenditures Consortiums/ Reclasses Advances December 31, and Federal Direct Indirect Equipment and December 31, Account Name 2014 Grants Grants Costs Costs Additions Transfers 2015

FEDERAL GRANTS NIA-Mitochondrial Dysfunction in Aging $ - $ - $ 565,406 $ 175,346 $ 132,036 $ 258,024 $ - $ - NINDS-Injury and adaptation in the developing rat corticospinal - - 184,670 170,991 13,679 - - - NINDS-HDAC6: Target for regeneration following injury - - 375,594 180,715 146,379 48,500 - - NICHHD-Transcranial Direct Current Stimulation & Robotics - - 748,995 243,478 197,217 308,300 - - NEI-B-RAF drives regenerative axon growth in the optic nerve - - 471,391 241,124 195,311 34,956 - - NINDS-Impact of BDNF SNP on stroke-induced plasticity - - 376,687 179,414 152,502 44,771 - - NIH-Role of CD36 in Ischemic Inflammation - - 325,551 156,382 126,669 42,500 - - NIMH-Allelic Choice in Rett Syndrome - - 64,630 36,868 27,762 - - - NEI-Retinal Neural Processing During Retinal Degenerative - - 94,954 54,166 40,788 - - - NINDS-Using transcription factors to enhance transplanted - - 586,296 229,030 217,579 139,687 - - NICHHD-Non-invasive stimulation for improving motor function - - 151,566 55,285 52,522 43,759 - - NICHHD-Neural predictors of hand therapy efficacy in children - - 333,310 157,405 149,534 26,371 - - NIA-Benfotiamine in Alzheimer’s Disease - - 277,730 118,092 112,188 47,450 - - NIA-Plasticity in Aging - - 454,692 251,211 203,481 - - - NINDS-Elucidating the mechanisms of neuroprotection of histone - - 33,525 33,525 - - - - NINDS-The knob supination task: a sensitive test of corticospinal - - 95,160 43,153 40,995 11,012 - - NINDS-Motor cortex electrical stimulation to augment spontaneous - - 234,250 120,129 114,121 - - - NICHHD-Transcranial direct current stimulation and robotic - - 38,188 19,584 18,604 - - - Total federal grants - - 5,412,595 2,465,898 1,941,367 1,005,330 - -

Totals $ 2,169,915 $ 4,348,810 $ 5,412,595 $ 6,441,672 $ 2,156,740 $ 2,096,949 $ 601,228 $ 1,837,187

The accompanying notes are an integral part of these consolidated financial statements. - 41 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statements of Financial Position As of December 31, 2015

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,999,841 $ 1,332,507 $ - $ 5,332,348 $ 5,211,577 $ - $ 10,543,925 Short investments - - - - 305,403 - 305,403 Assets whose use is limited required for current liabilities - - - - 639,435 - 639,435 Accounts receivable for services to patients - net - - - - 9,556,631 - 9,556,631 Prepaid expenses - 131,754 - 131,754 1,902,943 - 2,034,697 Inventory of supplies - - - - 543,003 - 543,003 Due from affiliated organizations - 283,055 (283,055) - 431,325 (431,325) - Other receivables 16,134 1,367,015 - 1,383,149 763,913 - 2,147,062 Total current assets 4,015,975 3,114,331 (283,055) 6,847,251 19,354,230 (431,325) 25,770,156 ASSETS WHOSE USE IS LIMITED Foundation funds 82,985,296 - - 82,985,296 - - 82,985,296 Trusteed funds - - - - 24,712,105 - 24,712,105 Self-insurance trust - - - - 2,206,145 - 2,206,145 Restricted use cash - - - - 223,435 - 223,435 Depreciation fund - - - - 31,776 - 31,776 Donor-restricted long-term investments - - - - 3,403,100 - 3,403,100 82,985,296 - - 82,985,296 30,576,561 - 113,561,857 Less: assets whose use is limited required for current liabilities - - - - (639,435) - (639,435) 82,985,296 - - 82,985,296 29,937,126 - 112,922,422 Deferred financing costs - net - 84,332 - 84,332 - - 84,332 Interest rate cap - 236 - 236 - - 236 Property, plant and equipment - net - 9,158,114 - 9,158,114 21,546,760 - 30,704,874 Total assets $ 87,001,271 $ 12,357,013 $ (283,055) $ 99,075,229 $ 70,838,116 $ (431,325) $ 169,482,020

The accompanying notes are an integral part of these consolidated financial statements. - 42 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statements of Financial Position As of December 31, 2015

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 30,433 $ 419,411 $ - $ 449,844 $ 1,659,506 $ - $ 2,109,350 Accrued expenses - 611,043 - 611,043 2,668,973 - 3,280,016 Current portion of long-term debt - 347,461 - 347,461 265,463 - 612,924 Estimated self-insurance liabilities - - - - 416,000 - 416,000 Third party payables - - - - 647,189 - 647,189 Refundable advances - 1,837,187 - 1,837,187 - - 1,837,187 Accrued retirement benefits - - - - 2,119,019 - 2,119,019 Due to affiliated organizations 714,380 - (283,055) 431,325 - (431,325) - Total current liabilities 744,813 3,215,102 (283,055) 3,676,860 7,776,150 (431,325) 11,021,685 Long-term debt, net of current portion - 4,864,451 - 4,864,451 354,626 - 5,219,077 Estimated self-insurance liabilities, net of current portion - - - - 1,814,889 - 1,814,889 Accrued retirement benefits - - - - 56,221,040 - 56,221,040 Total liabilities 744,813 8,079,553 (283,055) 8,541,311 66,166,705 (431,325) 74,276,691 NET ASSETS Unrestricted 86,256,458 4,277,460 - 90,533,918 989,164 - 91,523,082 Temporarily restricted - - - - 2,894,662 - 2,894,662 Permanently restricted - - - - 787,585 - 787,585 Total net assets 86,256,458 4,277,460 - 90,533,918 4,671,411 - 95,205,329

Total liabilities and net assets $ 87,001,271 $ 12,357,013 $ (283,055) $ 99,075,229 $ 70,838,116 $ (431,325) $ 169,482,020

The accompanying notes are an integral part of these consolidated financial statements. - 43 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statements of Financial Position As of December 31, 2014

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,020,131 $ 1,849,213 $ - $ 4,869,344 $ 13,601,956 $ - $ 18,471,300 Short investments - - - - 158,264 - 158,264 Assets whose use is limited required for current liabilities - - - - 808,678 - 808,678 Accounts receivable for services to patients - net - - - - 8,662,540 - 8,662,540 Prepaid expenses - 143,358 - 143,358 1,458,963 - 1,602,321 Inventory of supplies - - - - 543,542 - 543,542 Due from affiliated organizations - - - - 667,298 (667,298) - Other receivables 17,495 2,306,208 - 2,323,703 1,455,214 - 3,778,917 Total current assets 3,037,626 4,298,779 - 7,336,405 27,356,455 (667,298) 34,025,562 ASSETS WHOSE USE IS LIMITED Foundation funds 93,854,367 - - 93,854,367 - - 93,854,367 Trusteed funds - - - - 26,245,577 - 26,245,577 Self-insurance trust - - - - 2,612,707 - 2,612,707 Restricted use cash - - - - 212,678 - 212,678 Depreciation fund - - - - 31,776 - 31,776 Donor-restricted long-term investments - - - - 2,866,329 - 2,866,329 93,854,367 - - 93,854,367 31,969,067 - 125,823,434 Less: assets whose use is limited required for current liabilities - - - - (808,678) - (808,678) 93,854,367 - - 93,854,367 31,160,389 - 125,014,756 Deferred financing costs - net - 89,924 - 89,924 - - 89,924 Interest rate cap - 8,249 - 8,249 - - 8,249 Property, plant and equipment - net - 9,174,670 - 9,174,670 22,217,173 - 31,391,843 Total assets $ 96,891,993 $ 13,571,622 $ - $ 110,463,615 $ 80,734,017 $ (667,298) $ 190,530,334 The accompanying notes are an integral part of these consolidated financial statements. - 44 - 07ETHE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statements of Financial Position As of December 31, 2014

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 29,094 $ 412,696 $ - $ 441,790 $ 1,671,717 $ - $ 2,113,507 Accrued expenses - 854,903 - 854,903 2,543,336 - 3,398,239 Current portion of long-term debt - 347,461 - 347,461 250,257 - 597,718 Estimated self-insurance liabilities - - - - 596,000 - 596,000 Third party payables - - - - 2,174,360 - 2,174,360 Refundable advances - 2,169,915 - 2,169,915 - - 2,169,915 Accrued retirement benefits - - - - 2,018,223 - 2,018,223 Due to affiliated organizations 155,109 512,189 - 667,298 - (667,298) -

Total current liabilities 184,203 4,297,164 - 4,481,367 9,253,893 (667,298) 13,067,962 Long-term debt, net of current portion - 5,211,911 - 5,211,911 620,089 - 5,832,000 Estimated self-insurance liabilities, net of current portion - - - - 2,522,640 - 2,522,640 Accrued retirement benefits - - - - 57,378,641 - 57,378,641 Total liabilities 184,203 9,509,075 - 9,693,278 69,775,263 (667,298) 78,801,243 NET ASSETS Unrestricted 96,707,791 4,062,546 - 100,770,337 7,548,208 - 108,318,545 Temporarily restricted - - - - 2,622,961 - 2,622,961 Permanently restricted - - - - 787,585 - 787,585 Total net assets 96,707,791 4,062,546 - 100,770,337 10,958,754 - 111,729,091

Total liabilities and net assets $ 96,891,994 $ 13,571,621 $ - $ 110,463,615 $ 80,734,017 $ (667,298) $ 190,530,334

The accompanying notes are an integral part of these consolidated financial statements. - 45 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statement of Operations For the year ended December 31, 2015

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances UNRESTRICTED NET ASSETS REVENUES Net patient service revenue $ - $ - $ - $ - $ 60,706,321 $ - $ 60,706,321 Grant revenue - 14,886,215 (4,190,854) 10,695,361 - - 10,695,361 Other revenue - 143,208 - 143,208 8,540,502 (2,750,450) 5,933,260 Net assets released from restrictions - operations - - - - 226,975 - 226,975 Total revenues - 15,029,423 (4,190,854) 10,838,569 69,473,798 (2,750,450) 77,561,917 EXPENSES Salaries and wages - 6,165,615 - 6,165,615 42,441,697 - 48,607,312 Supplies and expenses 5,773,537 7,075,607 (4,190,854) 8,658,290 12,757,685 (2,750,450) 18,665,525 Employee benefits - 1,784,488 - 1,784,488 16,615,398 - 18,399,886 Depreciation and amortization - 1,487,189 - 1,487,189 3,864,208 - 5,351,397 Provision for bad debts - - - - 290,078 - 290,078 Interest - 106,101 - 106,101 45,593 - 151,694 Total expenses 5,773,537 16,619,000 (4,190,854) 18,201,683 76,014,659 (2,750,450) 91,465,892 Loss from operations (5,773,537) (1,589,577) - (7,363,114) (6,540,861) - (13,903,975) NONOPERATING GAINS AND (LOSSES) - NET Contributions 538,054 - - 538,054 179,246 - 717,300 Corporate Restructuring Costs - - - - (1,946,729) - (1,946,729) Change in fair value of interest rate cap - (8,013) - (8,013) - - (8,013) Losses on disposal of assets - - - - (693) - (693) Investment return - net (4,399,306) - - (4,399,306) (1,357,383) - (5,756,689)

Nonoperating loss - net (3,861,252) (8,013) - (3,869,265) (3,125,559) - (6,994,824) Deficiency in revenue and gains over expenses and losses (9,634,789) (1,597,590) - (11,232,379) (9,666,420) - (20,898,799) OTHER CHANGES IN UNRESTRICTED NET ASSETS - Net assets released from restrictions - capital acquisition - 1,212,313 - 1,212,313 67,263 - 1,279,576 Other accrued retirement benefit adjustment - - - - 2,823,760 - 2,823,760 Transfers (to) from affiliates (816,543) 600,185 - (216,358) 216,358 - - (Decrease) increase in unrestricted net assets $ (10,451,332) $ 214,908 $ - $ (10,236,424) $ (6,559,039) $ - $ (16,795,463)

The accompanying notes are an integral part of these consolidated financial statements. - 46 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Consolidating Statement of Operations For the year ended December 31, 2014

Combined Elimination Foundation Elimination Consolidated Foundation Institute Entries and Institute Hospital Entries Balances UNRESTRICTED NET ASSETS REVENUES Net patient service revenue $ - $ - $ - $ - $ 61,126,173 $ - $ 61,126,173 Grant revenue - 13,643,645 (4,264,660) 9,378,985 - - 9,378,985 Other revenue - 100,718 - 100,718 7,853,777 (2,252,797) 5,701,698 Medicare technology stimulus revenue - - - - 1,314,327 - 1,314,327 Net assets released from restrictions - operations - - - - 398,042 - 398,042 Total revenues - 13,744,363 (4,264,660) 9,479,703 70,692,319 (2,252,797) 77,919,225 EXPENSES Salaries and wages - 6,119,393 - 6,119,393 41,489,031 - 47,608,424 Supplies and expenses 5,486,846 6,019,947 (4,264,660) 7,242,133 13,829,724 (2,252,797) 18,819,060 Employee benefits - 1,498,045 - 1,498,045 12,552,568 - 14,050,613 Depreciation and amortization - 1,412,688 - 1,412,688 3,939,144 - 5,351,832 Provision for bad debts - - - - 203,418 - 203,418 Interest - 110,457 - 110,457 59,964 - 170,421

Total expenses 5,486,846 15,160,530 (4,264,660) 16,382,716 72,073,849 (2,252,797) 86,203,768

Loss from operations (5,486,846) (1,416,167) - (6,903,013) (1,381,530) - (8,284,543) NONOPERATING GAINS AND (LOSSES) - NET Contributions 528,150 - - 528,150 94,982 - 623,132 Change in fair value of interest rate cap - (30,906) - (30,906) - - (30,906) Investment return - net 1,724,446 - - 1,724,446 819,452 - 2,543,898

Nonoperating gain (loss) - net 2,252,596 (30,906) - 2,221,690 914,434 - 3,136,124 Deficiency in revenue and gains over expenses and losses (3,234,250) (1,447,073) - (4,681,323) (467,096) - (5,148,419) OTHER CHANGES IN UNRESTRICTED NET ASSETS Net assets released from restrictions - capital acquisition - 545,274 - 545,274 107,776 - 653,050 Other accrued retirement benefit adjustment - - - - (29,678,088) - (29,678,088) Transfers (to) from affiliates (415,234) 415,234 - - - - - Decrease in unrestricted net assets $ (3,649,484) $ (486,565) $ - $ (4,136,049) $ (30,037,408) $ - $ (34,173,457)

The accompanying notes are an integral part of these consolidated financial statements. - 47 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Schedule of Expenditures of Federal Awards For the year ended December 31, 2015

Federal Total CFDA Award Federal Federal Federal Grantor or Pass-through Grantor/Program Title Number Amount Award Term Grant/Contract Expenditures

U.S. Department of Health And Human Services – National Institute of Health

Research and Development Cluster: National Institute of Aging: Mitochondrial Dysfunction in Neuro-degeneration of Aging 93.866 $ 1,626,785 06/15/2014 – 04/30/2015 5P01AG014930-14 $ 565,406 Benfotiamine in Alzheimer’s Disease: A Pilot Study 93.866 328,785 09/01/2014 – 05/31/2015 1R01AG043679-01A1 246,985 Benfotiamine in Alzheimer’s Disease: A Pilot Study 93.866 318,922 06/01/2015 – 05/31/2016 5R01AG043679-02 30,745 Total Aging Research 843,136

National Heart, Lung and Blood Institute: The Role of CD36 in Ischemic Inflammation and Injury 93.839 460,802 07/01/2014 – 06/30/2015 5R01HL082511-09 325,551

National Institute on Deafness and Communication Disorders: Plasticity in the Aging Olfactory System 93.173 530,904 06/01/2014 – 05/31/2015 5R01DC008955-22 196,682 Plasticity in the Aging Olfactory System 93.173 525,595 06/01/2015 – 05/31/2016 5R01DC008955-23 258,010 Total Deafness and Communication Disorders Research 454,692

Eunice Kennedy Shriver Child Health and Human Development: Transcranial Direct Current Stimulation & Robotics 93.865 632,372 03/01/2014 – 02/28/2015 5R01HD069776-03 145,916 Transcranial Direct Current Stimulation & Robotics 93.865 633,698 03/01/2015 – 02/29/2016 5R01HD069776-04 603,079 Non-invasive Stimulation for Improving Motor Function 93.865 231,858 08/01/2014 – 07/31/2015 5R21HD077616-02 151,566 Neural Predictors of Hand Therapy Efficacy in Children with Cerebral Palsy 93.865 398,879 09/26/2014 – 06/30/2015 1R01HD076436-01A1 166,655 Neural Predictors of Hand Therapy Efficacy in Children with Cerebral Palsy 93.865 365,750 07/01/2015 – 06/30/2016 5R01HD076436-02 166,655 Transcranial Direct Current Stimulation & Robotic Training in Adults with Cerebral Palsy 93.865 97,500 08/06/2015 – 07/31/2016 1R03HD084971-01 38,188 Total Child Health and Human Development Extramural Research 1,272,059

National Institute of Neurological Disorders and Stroke: HDAC6 – Target for Regeneration Following Injury in the nervous system 93.853 376,698 03/01/2014 – 02/28/2015 5R01NS071056-04 25,542 HDAC6 – Target for Regeneration Following Injury in the nervous system 93.853 380,503 03/01/2015 – 02/29/2016 5R01NS071056-05 350,052

See accompanying note to schedule of expenditures of federal awards. - 48 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Schedule of Expenditures of Federal Awards For the year ended December 31, 2015

Federal Total CFDA Award Federal Federal Federal Grantor or Pass-through Grantor/Program Title Number Amount Award Term Grant/Contract Expenditures

U.S. Department of Health And Human Services – National Institute of Health (continued) National Institute of Neurological Disorders and Stroke (continued): Impact of BDNF SNP on stroke-induced plasticity 93.853 $ 392,507 06/01/2014 – 05/31/2015 5R01NS077897-03 $ 106,577 Impact of BDNF SNP on stroke-induced plasticity 93.853 396,581 06/01/2015 – 05/31/2016 5R01NS077897-04 270,110 Injury and adaptation in the developing rat corticospinal and rubrospinal tracts 93.853 184,613 09/01/2014 – 08/31/2015 5K08NS073796-04 124,974 Injury and adaptation in the developing rat corticospinal and rubrospinal tracts 93.853 184,613 09/01/2015 – 08/31/2016 5K08NS073796-05 59,696 Using Transcription Factors to Enhance Transplanted Cell Survival for SCI Repair 93.853 589,679 06/01/2014 – 05/31/2015 1R01NS075375-01A1 293,148 Using Transcription Factors to Enhance Transplanted Cell Survival for SCI Repair 93.853 492,627 06/01/2015 – 05/31/2016 5R01NS075375-02 293,148 Elucidating the Mechanisms of Neuroprotection of Histone Deacetylase Inhibition in Ischemic Stroke 93.853 58,742 07/01/2015 – 06/30/2016 1F32NS090810-01A1 33,525 The Knob Supination Task: A Sensitive Test of Corticospinal Function in the Rat 93.853 93,300 02/01/2015 – 01/31/2016 1R03NS091737-01 95,160 Motor Cortex Electrical Stimulation to Augment Spontaneous Recovery After Chronic Subcortical Stroke 93.853 426,563 08/15/2015 – 05/31/2016 1R01NS092875-01 234,250 Total Extramural Research Programs in the Neurosciences 1,886,182 and Neurological Disorders

National Institute of Mental Health: Allelic Choice in Rett Syndrome 93.242 390,481 03/01/2014 – 02/28/2015 5R01MH090267-05 64,630

National Eye Institute: Retinal Neural Processing During Retinal Degenerative Diseases 93.867 412,306 04/01/2014 – 03/31/2015 5R01EY020535-05 94,954 B-RAF drives regenerative axon growth in optic nerve in vivo 93.867 443,450 05/01/2014 – 04/30/2015 5R01EY022409-03 229,758 B-RAF drives regenerative axon growth in optic nerve in vivo 93.867 443,450 05/01/2015 – 04/30/2016 5R01EY022409-04 241,633 Total Vision Research 566,345

Total Research and Development Cluster and Federal Expenditures $ 5,412,595

See accompanying note to schedule of expenditures of federal awards. - 49 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Schedule of Expenditures of Federal Awards For the year ended December 31, 2015

1. BASIS OF PRESENTATION

The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”) has been prepared on the accrual basis of accounting. The information in the Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Federal award program amounts, as presented in the accompanying Schedule, represent expenditures or federal award payments administered by the Organization during the year ended December 31, 2015. Amounts reported in the accompanying schedule agree with the amounts reported in the related federal financial reports filed by the Organization.

2. SUBRECIPIENTS

Of the federal expenditures presented on the accompanying schedule, the Organization provided federal awards to sub-recipients as follows:

Federal Amount CFDA Provided to Sub-recipient/Program Title Number Sub-recipients

Weill Medical College of Cornell: Aging Research 93.866 $ 258,024

Columbia University: Aging Research 93.866 47,450

Weill Medical College of Cornell: Heart, Lung Research 93.839 42,500

Weill Medical College of Cornell: Neuroscience & Neurological Disorders 93.853 44,771

The University of South Carolina: Neuroscience & Neurological Disorders 93.853 48,500

The University of Texas at Dallas: Neuroscience & Neurological Disorders 93.853 11,012

Massachusetts Institute of Technology – Trans: Child Health & Human Development 93.865 152,707

Beth Israel Deaconess Medical/Research Finance: Child Health & Human Development 93.865 75,822

Spaulding Rehabilitation Hospital: Child Health & Human Development 93.865 25,055

- 50 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Notes to Schedule of Expenditures of Federal Awards For the year ended December 31, 2015

Federal Amount CFDA Provided to Sub-recipient/Program Title Number Sub-recipients

The Feinstein Institute for Medical Research: Child Health & Human Development 93.865 $ 98,475

Teachers College, Columbia University: Child Health & Human Development 93.865 26,371

Boston’s Children Hospital: National Eye Institute 93.867 34,956

$ 865,643

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Grant Thornton LLP 757 Third Avenue, 9th Floor New York, NY 10017

T 212.599.0100 F 212.370.4520 GrantThornton.com linkd.in/GrantThorntonUS twitter.com/GrantThorntonUS

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT AUDITING STANDARDS

To the Board of Directors of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries

We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the consolidated financial statements of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries (the “Organization”), which comprise the consolidated statement of financial position as of December 31, 2015, and the related consolidated statements of operations, consolidated statements of changed in net assets and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated May 31, 2016.

Internal control over financial reporting In planning and performing our audit of the consolidated financial statements, we considered the Organization’s internal control over financial reporting (“internal control”) to design audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Organization’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

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Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the Organization’s internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and other matters As part of obtaining reasonable assurance about whether the Organization’s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Intended purpose The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control and compliance. Accordingly, this report is not suitable for any other purpose.

New York, New York May 31, 2016

- 53 -

Grant Thornton LLP 757 Third Avenue, 9th Floor New York, NY 10017

T 212.599.0100 F 212.370.4520 GrantThornton.com linkd.in/GrantThorntonUS twitter.com/GrantThorntonUS

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

To the Board of Directors of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries

Report on compliance for each major federal program We have audited the compliance of The Winifred Masterson Burke Rehabilitation Hospital and Subsidiaries (the

“Organization”) with the types of compliance requirements described in the U.S. Office of Management and

Budget’s OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2015. The Organization’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to the Organization’s federal programs.

Auditor’s responsibility Our responsibility is to express an opinion on compliance for each of the Organization’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

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Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization’s compliance.

Opinion on each major federal program In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2015.

Report on internal control over compliance Management of the Organization is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization’s internal control over compliance with the types of compliance requirements that could have a direct and material effect on each major federal program to design audit procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the Organization’s internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this Report on Internal Control Over Compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

New York, New York May 31, 2016

- 55 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Schedule of Findings and Questioned Costs For the year ended December 31, 2015

SECTION I - SUMMARY OF AUDITORS’ RESULTS

Financial Statements

Type of auditors’ report issued Unmodified

Internal control over financial reporting material weakness(es) identified? __yes X no

Significant deficiency(ies) identified that are not considered to be material weaknesses? __yes X no

Noncompliance material to financial statements noted? __yes X no

Federal Awards

Internal control over the major program significant deficiency(ies) identified? __ yes X no

Type of auditors’ report issued on compliance for the major program: Unmodified

Any audit findings disclosed that are required to be reported in accordance with Subpart F, section 516 of the Uniform Guidance? __yes X no

Identification of the major program

Name of Grantor and Federal Program or Cluster Federal CFDA Number

Research and Development Cluster 93.866, 93.839, 93.173 93.865, 93.853, 93.242, 93.867

Dollar threshold used to distinguish between type A and type B programs $750,000

Auditee qualified as low-risk auditee? X yes no

- 56 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Schedule of Findings and Questioned Costs For the year ended December 31, 2015

SECTION II - FINANCIAL STATEMENT FINDINGS

None noted.

- 57 - THE WINIFRED MASTERSON BURKE REHABILITATION HOSPITAL AND SUBSIDIARIES Schedule of Findings and Questioned Costs For the year ended December 31, 2015

SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

None noted.

- 58 -